How to Write an Investment Policy Statement

Foreword by Don Trone 11 SECTION ONE: Why Plan Sponsors and All Fiduciaries Need a Formal Process for Writing Their Investment Policy Statement Chapter 1 ERISA AND THE CHALLENGE OF FIDUCIARY RESPONSIBILITY 17 Writing an Investment Policy 17 What Is a Fiduciary?18 Fiduciary Liability19 Chapter 2 YOUR FIDUCIARY RESPONSIBILITIES AND LIABILITIES UNDER ERISA 21 Five Fiduciary Responsibilities 21 Fiduciary's Personal Liability 22 A Fiduciary's Primary Role Is to Manage the Process 23 Chapter 3 WHAT IS AN INVESTMENT POLICY STATEMENT AND WHAT ARE THE BENEFITS? 25 Risk Management 25 Monitor Investments 26 Summary 27 Chapter 4 UTILIZE THE "SAFE HARBOR" PROVISIONS PROVIDED BY ERISA 29 Prudent Experts 29 Five Recognized "Safe Harbor" Rules 29 Chapter 5 COMPLYING WITH ERISA SECTION 404(c) 31 SECTION TWO: How to Get Started and Steps to Formalize the Process Chapter 6 ASSEMBLING THE DOCUMENTATION 35 Chapter 7 STEPS TO FORMALIZE THE PROCESS 37 STEP 1: Decide on Plan Goals, Objectives, and Strategies 37 STEP 2: Decide on Strategy for Managing Risk 37 STEP 3: Determine the Risk Tolerance of the Plan 38 STEP 4: Set Forth Guidelines for Asset Classes 39 STEP 5: Implement an Asset-Allocation Policy 39 STEP 6: Mutual Funds Recommendations 39 STEP 7: Delegate Investment Management Responsibility 40 STEP 8: Investment Monitoring and Reporting 40 SECTION THREE: The Template IPS Chapter 8 SAMPLE IPS TEMPLATES 43 Two Distinct IPS Samples 43 Organization of Templates 43 Chapter 9 SAMPLE IPS TEMPLATE #1: For Participant-Directed 401(k) That Intends to Comply with ERISA Section 404(c) 458 STEP 1 Executive Summary and Background 45 STEP 2 Purpose of the Investment Policy Statement 46 STEP 3 Duties and Responsibilities 48 STEP 4 Asset Class Guidelines 50 STEP 5 Investment Manager Selection 52 STEP 6 Monitoring the Investment Managers 53 STEP 7 Controlling and Accounting for Investment Expenses 55 STEP 8 Investment Policy Review and Monitoring 56 Chapter 10 SAMPLE IPS TEMPLATE #2: For High-Net-Worth Individual Setting Up a Family Trust 57 Executive Summary 58 PART I--Purpose 59 PART II--Investment Management Objectives 59 PART III-- Roles and Responsibilities 60 PART IV-- Investment Manager Selection 61 PART V-- Investment Monitoring and Review 63 PART VI-- Manager Termination 65 PART VII-- Additional Provisions (optional)65 Conclusion MESSAGE TO PLAN SPONSORS 67 Glossary 69 Appendix: The Firm Profile 77 About the Author 7